Queensland Major Projects Pipeline

Queensland Major Projects Pipeline

Queensland Major Projects Pipeline

A JOINT INITIATIVE OF THE QMCA, CSQ AND IAQ Queensland Major Projects Pipeline

Queensland Major Projects Pipeline

Total $39.9b Unlikely Prospective Major Projects Pipeline – Breakdown $39.9 billion total (over 5 years) Credibly proposed 33 $6.9b $5.1b $4.1b 43 22 projects valued at projects valued at projects valued at Unfunded $16.1 billion Public Projects $20.2b Private Projects $19.7b Major project activity Funding split Total Pipeline Value $39.9b AT A GLANCE

Queensland Major Projects Pipeline

Major Projects Jobs Announced Under construction Under procurement 22 $5.3b $4.1b $14.4b 12 58 projects valued at projects valued at projects valued at Funded $23.8 billion South East Queensland Surat Basin $13.6b North Queensland $8.2b $3.8b Various 14.3b Fully-funding the pipeline will support an extra 4,700 workers each year on average The funded pipeline will support 12,700 workers each year on average per year per week per working hour per day $21m $2.1m $152m Scale of Recurring Expenditure $7.9b

Queensland Major Projects Pipeline

CONTENTS Foreword1 Executive Summary 2 Long-term Challenges and Recommendations 5 Economic Outlook 10 Long-term Queensland Major Projects Pipeline 24 Workforce and Employment Outlook 38 Implications, Challenges and Risks 46 Conclusion and Recommendations 60 2018 Major Projects List  64 This report has been produced by the QMCA, CSQ and IAQ (“the Industry Bodies”) with the assistance of BIS Oxford Economics. The report is based on information available as at end March 2018 from public and private sources including Project Sponsors and the Industry Bodies, Project Sponsors and BIS Oxford Economics provide no warranty as to its accuracy, reliability or completeness.

To the extent permitted by law, neither the Industry Bodies, Project Sponsors or BIS Oxford Economics or any of their related entities accept liability to any person for loss or damage arising from the use of the information contained in this report.

Queensland Major Projects Pipeline

FOREWORD Nowhere else in Australia do industry peak bodies consult so closely with governments, government-owned corporations and private sector proponents to accurately chart the status of all major projects in their home state. The fruit of this approach is an authoritative report which describes the scale, timing and location of all major engineering projects being considered or developed in Queensland. Sincere thanks to our partner BIS-Oxford Economics for their expert guidance, compilation of the project listings and the detailed independent analysis that underpins the report. This year, we have increased our investment in the report format to enhance reading experience and improve access to key report data through a dedicated website.

The new design and look of this report is a statement of confidence in the future of our partnership and the continued relevance of our report to industry for years to come.

For infrastructure designers, contractors and other project participants, this report is an indispensable business planning tool, capable of guiding well-informed decisions to participate in chosen market sectors and geographic regions. For governments, the consolidated picture of state wide major project activity in the next four years can help guide policy formation, unlock the potential for private sector partnerships and leverage capital works investment. The greatest threats to a sustainable pipeline of projects are the identification of investable projects, availability of funds and timely investment decisions.

This year’s report highlights much lower levels of private sector investment than previous years, with $9.4 billion of projects classified as only prospective or considered unlikely to receive funding. Until positive business cases and investment decisions are made, mining and industrial projects such as those in the undeveloped Galilee Basin remain at risk. The value of public sector projects which have positive funding announcements or are currently under procurement outstrips the private sector. The report also forecasts a significant 72% reduction in private sector mining and heavy industry projects in the next five years compared to the last.

The ability of governments to identify and deliver on their planned infrastructure has therefore assumed even greater importance to the continued short- term sustainability of the major projects contracting sector.

Queensland is a decentralised and vast Australian state which requires continued investment in infrastructure by both public and private sectors to meet demands of a growing population and increase our global competitiveness. Experience from successful countries and jurisdictions around the world show that when public and private sectors face infrastructure challenges together, the public and economy are the big winners. Perhaps the real worth of our report is that it sends a strong signal to potential infrastructure investors that a highly motivated engineering sector exists, with contractors and service providers eminently capable of preparing for and delivering world class major projects.

As industry peak bodies we are committed to promoting Queensland as a world leading destination for economic development and new infrastructure investment. We look forward to working with all our stakeholders in 2018 to grow the pipeline of major projects in our great State. We are proud to introduce the 2018 Queensland Major Projects Pipeline Report to you – an initiative of the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ). Peter Anusas President Queensland Major Contractors Association Brett Schimming Chief Executive Officer Construction Skills Queensland Steve Abson Chief Executive Officer Infrastructure Association of Queensland 1 Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline

Queensland Major Projects Pipeline

EXECUTIVE SUMMARY Welcome to the second Queensland Major Projects Pipeline Report (the Report) developed by the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ). During this period, Queensland experienced a substantial boom and bust cycle in construction activity and major project work. The key finding of this Report is that major project work has risen by 58% in 2017/2018 to $6.9 billion after two successive years of low activity. Subject to level of funding commitments for 22 credibly proposed projects, activity in 2018/2019 is forecast to be retained at a similar level.

However, recovery in activity may be short-lived and decline again in 2019/2020 due to an identified lack of viable replacement projects. Maintaining recent momentum is therefore the core challenge facing the state, requiring a range of initiatives to improve levels of funding for infrastructure, ensure capability and capacity to manage a growing pipeline and, fundamentally, provide positive conditions and frameworks that support the economy’s growth engines: public and private investment. Given rising major project activity in other states, and the need to provide infrastructure to meet growing demand in Queensland, governments need to consider how they can raise additional funding for infrastructure projects, accelerate existing projects or stimulate private investment.

Maintaining a stable and mildly growing pipeline of major project work from here will not only support economic growth and the sustainability of the major projects industry, but importantly will likely cost the government much less than if the projects were undertaken later in the cycle or in a more heated environment. Industry can feel more confident about investing in new equipment, productivity enhancing initiatives and skills development if they are given reasonable lead times to prepare in the form of a clear, long-term major projects pipeline – and if governments and procuring agencies implement supportive policies.

This year’s Report provides a comprehensive list of major project work, together with analysis on the corresponding level of construction activity this entails and the subsequent demand for skilled construction labour. This analysis is based on both the completion of existing projects and the likelihood of potential projects proceeding. A complete list of major projects considered for this analysis, and the explicit assumptions for each project regarding work done and construction workforces employed each year, are provided in the Appendix at the end of this report. As well as presenting the pipeline, the Report discusses the key economic settings where major project activity is taking place, for Queensland and Australia, together with global trends.

Given rising major project activity in other states and the need to meet growing demand in Queensland, governments need to consider how they can raise additional funding for infrastructure projects, accelerate existing projects or stimulate private investment 2 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook

Queensland Major Projects Pipeline

KEY FINDINGS — — The total value of 190 projects identified in the 2018 pipeline is $39.9 billion (Engineering Value), compared to 166 projects valued at $39.1 billion in the 2017 pipeline. However, the value of funded work in the pipeline is only $23.8 billion, with 98 public and private projects still awaiting funding commitments. — — Northern Queensland has the strongest growth prospects in the pipeline for all regions (including funded and unfunded work) compared to the past five years, but South East Queensland still commands the largest share of major projects activity (Figure 3).

— — New public and private investment – including projects in the Major Projects Pipeline – is having a broader, stimulatory effect on the Queensland economy.

— — Queensland still lags New South Wales and Victoria in terms of funding and delivering infrastructure. As New South Wales and Victoria further ramp up infrastructure investment over the remainder of this decade, challenges may re-emerge in procuring construction services in Queensland. This is a challenge that will be compounded not only by digital disruption but by Queensland’s and Australia’s changing demographics – and in particular the ageing of the workforce, as identified in the workforce implications section of the Report.

— — Public and private sector investment – focused in roads, rail, telecoms and electricity – is driving the current recovery in major project work. — — While major project activity has risen from the 2016-2017 trough – the main challenge will be keeping activity at sustainable levels into the future given the weak outlook for currently funded work (Figure 1). — — The value of public sector projects that have funds committed or are currently under procurement now outstrip the private sector by a factor of 6 to 1. The ability of governments to identify and deliver on their planned infrastructure has therefore assumed even greater importance to the continued short-term sustainability of the major projects contracting sector.

17% of the overall project pipeline ($6.9B) is unlikely to proceed 3 Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline

Queensland Major Projects Pipeline

Figure 1 Major Projects Work Done: All Segments 2 4 6 8 10 12 14 16 18 20 Funded $ Billions Total Credibly Proposed Total Prospective Total Unlikely % of Public Funding (RHS) 2010/11 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2011/12 0% 10% 20% 30% 40% 50% 60% Figure 2 – Outlook by Sector Total Pipeline of Work Over the Next Five Years 0 2,000 4,000 6,000 8,000 10,000 12,000 Mining & heavy Industry Roads & Bridges Rail & Habours Non-Water Utilities Water & Sewerage Defence Funded Unfunded Compared to Previous Five Years (% Change) % N/A 42% 129% 85% 77% -72% Funded Not Funded -96% -12% N/A 361% 0 3,000 6,000 9,000 12,000 15,000 South East Queensland Surat Northern Queensland Galilee Bowen Gladstone -52% 167% Compared to Previous Five Years (% Change) % Figure 3 Outlook by Region Over the Next Five Years The total value of 190 projects identified in the 2018 pipeline is $39.9b 4 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook

Queensland Major Projects Pipeline

LONG-TERM CHALLENGES AND RECOMMENDATIONS While investment in major engineering projects has improved in Queensland, the general outlook for growth in investment, employment and the broader economy is not exactly spectacular. Rather than the high growth rates experienced during much of the 1990s and 2000s, economic growth (as captured by Gross State Product or GSP) is expected to average around 2.8% per annum through the next five years, with Queensland State Final Demand (SFD) growth averaging a slightly better 3.3% per annum. Historically, Queensland has significantly outperformed the Australian economy, however the next five years only sees very marginal outperformance overall.

It’s unsurprising that there is a correlation between major project work done and Queensland’s economic performance – with the latter represented by growth in SFD and GSP. Major project work has strong multiplier impacts on the economy, particularly when it uses local labour and resources. Essentially, additional major project work requires other industries to boost their outputs also – both directly to service the initial increase in construction output, and then indirectly to satisfy the subsequent expansion in the other industries. The overall gross multiplier (or total direct requirement) for heavy and civil engineering construction is over two, suggesting that every dollar increase in major project work “requires” an overall boost of over two dollars across the broader economy.

Apart from the short-term impacts, investment in critical infrastructure major projects can also boost long- run economic growth by improving productivity (e.g. reducing transport times and costs). This boosts the economy’s “speed limit” before it runs back into capacity constraints. Overall, sustaining growth in the Queensland economy requires putting into place plans and policies that will encourage and sustain both public and private investment in the state over the long-term. This means addressing funding issues highlighted in the 2017 Major Projects Pipeline Report, continuing to develop new productive infrastructure projects, and providing a supportive environment for privately funded projects to proceed.

Figure 4 Major Project Work Done and Queensland State Economic Performance 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2010/11 Not Funded Funded 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 -4 -2 2 4 6 8 10 SFD A%ch GSP A%ch 5 Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline

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